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    An Indian man displays Indian currency notes of 1000 and 500 rupees as he stands in queue to exchange or deposit discontinued currency notes outside a post office in Ahmadabad, India, Thursday, Nov. 10, 2016.

    Ex-RBI Governor Uncertain of Finance Ministry's Bullish Predictions for Economic Recovery

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    New Delhi (Sputnik): After a domestic growth shocker of 5 percent in the first quarter (April-June) of fiscal 2020, top Indian Finance Ministry officials expect Gross Domestic Product (GDP) growth to recover in the second half of the current financial year.

    The Indian government expects second quarter GDP numbers scheduled to be released on 29 November to remain muted. The ministry of finance has also said it is committed to the fiscal glide path.

    "Growth is likely to recover in the second half of this financial year,” a top official from the Department of Economic Affairs in India's finance ministry revealed, adding: “We are following the glide path on fiscal deficit and will continue to do that."

    The official hinted further measures to boost the economy would also be taken as and when needed.

    In response to the slowest first-quarter growth since 2013, India has initiated a series of measures including a corporate tax rate cut, relief to the real estate sector and relief for foreign institutional investors (FIIs) from a tax surcharge.

    Economists and experts are, however, cautious about the impact of the measures and feel it is the demand side which needs to be adjusted to address economic woes.

    “We have revised the second half GDP projections for the Indian economy to 6.9 percent from 7.4 percent earlier. The full-year GDP projections have been revised downwards to 6.1 percent,” said economist Sunil Sinha, director, Public Finance, India Ratings.

    Stating that measures announced by the government will have an impact in the medium to long-term, the economist said these measures do not address demand side woes in the Indian economy.

    With a corporate tax cut, profitability in the balance sheet has increased, Sinha said, “but there are no plans on investment”.

    “On the other hand, individual incomes are not rising, rural economy is not picking up and incremental demand is not being created. One has to address the demand side and put more money in the pockets of the people,” Sinha noted.

    Bimal Jalan, a former governor of New Delhi's Reserve Bank of India, struck a cautionary tone: “Policy measures announced by the government are good. The moves will work. It is, however, difficult to say when exactly will the impact be felt.”

    According to Jalan, markets must wait for the outcome of the policy measures. “It is difficult to predict when will the Indian economy recover, but hopefully it will recover”.

    Jalan, who recently chaired the Expert Committee to Review the Extant Economic Capital Framework said that a number of factors such as a global slowdown, a trade war and credit demands have contributed to the slowdown. The committee was constituted by the Reserve Bank of India to review the workings of the central bank.


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